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Textbook notes Ch.2-Understanding the Environment of Business

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Management (MGT)
Chris Bovaird

CHAPTER 2: Understanding the Environment of Business Introduce key measures of economic performance: Gross domestic product (GDP) productivity GDP growth inflation GDP capita unemployment gross national product (GNP) External Environment: everything out8L0,347J,3L],9L438-4:3,7L089K,92LJK9,110.9L9 Economic environment: conditions of the economic system in which an organization operates MacDonald: function in moderate unemployment (most ppl can eat out but pay higher wages) Evaluating Economic Systems Purpose of an economic system: N Assemble and organize resources; N Make things that people want; N So people will buy them; N Creating profits for suppliers; N So everyone will be better off. How to measure whether economy is functioning well? 1. Is economy producing things people want? 2. Is it producing things quickly and efficiently? 3. At reasonable prices? 4. Using the resources at its disposal? Economic Growth Business Cycle: patterns of short term ups and downs in an economy (Peak, recession, trough, and recovery) Recession: period during which aggregated output declines Depression: particularly severe and long-lasting recession Aggregate Output: total quantity of G+S produced by an economy during a given period - main measure of growth in business cycle - increase in AO is economic growth - output growth faster than population : 1) output per capita (quantity of G+S) increase 2) system provides more G+S higher standard of living Standard of Living 949,O6:,39L9416:,OL941*$9K,9,.4:3978.L9L]038 can purchase with the currency used in their economic system
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